YouTube Starts $5 Million Fund to Finance Original Videos

Plan Moves Google Further Into the Content Business

NEW YORK (AdAge.com) -- In a cautious move into the original content business, search titan Google announced that its YouTube property has created a $5 million fund to help finance more original videos. The company will invite up to 100 of its existing contributors to submit proposals to win a grant.

YouTube has attracted a growing list of individuals and small companies uploading original videos on a regular basis, including Mondo Media, which produces animated shorts.
"We're starting with proven partners, partners with the most views," said George Strompolos, who is part of YouTube's business-development group. "We'll be evaluating proposals based on their projected viewership, their marketing plan, distribution, everything. A lot of these folks have built up big audiences on YouTube, but they may be cash-constrained and not able to take their operation to the next level. That's what our fund is for."

YouTube has attracted a growing list of individuals and small companies uploading original videos on a regular basis, typically taking the form of a video blog, a satirical news cast or a sketch comedy. Examples of a YouTube partner include Mondo Media, which produces animated shorts, and Shane Dawson, who shoots original comedy skits every week. "They are the new class of content creators," Mr. Strompolos said.

Many of these partners get a revenue share from advertising that runs on their YouTube channel, but most do not generate enough page views to draw significant sums. "Many of these content creators have been out there on shoestring budgets," Mr. Strompolos said. "And it makes such perfect sense to take these brands and push them forward."

A partner could use funding for various purposes, Mr. Strompolos said, as long as YouTube is the primary distribution platform. The company envisions someone directing the money toward a short film, or to increase their current level of production on YouTube. "Maybe all they need to do double their output of videos is to hire a video editor," Mr. Strompolos said. In line with this effort, YouTube plans to support videos shot in what is known as 4K, a resolution that is four times higher than the current highest HD format of 1080p.

This latest move, though modest, further reveals Google's ambition to bulk up its content offerings. YouTube recently announced a deal with the WWE to offer full-length programming on its site. Seeding more original content on the site also acts as a hedge against potential copyright violations, even though YouTube recently won a copyright-infringement suit brought by Viacom.

Google has been on a quest to broaden its display-advertising revenue. Google VP Neal Mohan recently said the display market is at a "tipping point," and that Google's owned and operated properties, including YouTube, were key elements to their growth strategy.

Display advertising online is a roughly $20 billion market, and Citigroup analyst Mark Mahaney calculates that for its part Google will book as much as $600 million in display revenue this year, almost all of it from YouTube. "What we have documented with YouTube is still impressive size and growth, along with a growing variety of ad formats and clear evidence of increased monetization," Mr. Mahaney wrote in a recent report.